Question
In: Accounting
The Treadwater Bank wants to raise $ 1,000,000 using three-month commercial paper. The net proceeds to...
The Treadwater Bank wants to raise $ 1,000,000 using three-month commercial paper. The net proceeds to the bank will be $ 987,000. What is the effective annual rate of this financing for Treadwater? Magna Corporation has an issue of commercial paper with a face value of $ 1,000,000 and a maturity of six months. Magna received net proceeds of $ 975,347 when it sold the paper. What is the effective annual rate of the paper to Magna? Assume that the prime rate is 7.9 % APR, compounded quarterly. How much dollar savings in interest did Treadwater and Magna achieve by accessing the commercial paper market?
A. The effective annual rate of this financing for Treadwater is _____%. (Round to two decimal places.)
B. The effective annual rate of this financing for Magna is _____%. (Round to two decimal places.)
C. Treadwater saved _______.
Magna saved_______.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
15. What are the proceeds of $1,000,000 deposited in a bank yesterday (Aug 6) for 1...
15. What are the proceeds of $1,000,000 deposited in a bank
yesterday (Aug 6) for 1 month at 1.5%? Take care to apply “money
market” rules and use the proper “day count.”
16. What is the present value (as of today, Aug 7) of $1MM to
be paid Feb 7 2019 at a (discount) rate of 2%. (Same instructions
as in 15.)
17. An asset promises to pay the following:
? $60 each year for the next ten years: and...
15. What are the proceeds of $1,000,000 deposited in a bank yesterday (Aug 6) for 1...
15. What are the proceeds of $1,000,000 deposited in a bank
yesterday (Aug 6) for 1 month at 1.5%? Take care to apply “money
market” rules and use the proper “day count.”
16. What is the present value (as of today, Aug 7) of $1MM to
be paid Feb 7 2019 at a (discount) rate of 2%. (Same instructions
as in 15.)
17. An asset promises to pay the following:
? $60 each year for the next ten years: and...
Yunes’ Yearlings (YY) is able to raise funds by issuing commercial paper with a face value...
Yunes’ Yearlings (YY) is able to raise funds by issuing
commercial paper with a face value of $100,000. If commercial paper
is issued, the simple interest rate would be 5 percent, the time to
maturity would be 90 days, and YY would have to pay a transaction
fee equal to 0.25 percent of the issue, which would be taken out of
the issue amount. Compute the commercial paper’s APR and rEAR.
You are considering purchasing a small commercial property for $1,000,000. A bank has offered you two...
You are considering purchasing a small commercial property for
$1,000,000. A bank has offered you two different loan options, the
first would require a down payment of 30% and would have an
interest rate of 5.25%. The second option would require a
downpayment of only 20%, but the interest rate would rise to 6%.
Both loans would have 25 year terms. After determining your monthly
payment for each, calculate how much you are effectively paying
(solving for RATE) for the...
3. A bank with branches located in a commercial area in Jakarta wants to improve the...
3. A bank with branches located in a commercial area in Jakarta
wants to improve the process for serving customers during the lunch
time period.
Waiting time data was collected from a random sample of 15
customers in Bank branch 1, as follows:
4.21 5.55 3.02 5.13 4.77 2.34 3.54
3.20 4.50 6.10 0.38 5.12 6.46 6.19 3.79
Data was also collected from a random sample of 15 customers in
Bank branch 2, as follows:
9.66 5.90 8.02 5.79 8.73...
Berkman Investment Bank has the following bond deals under way:. Determine the net proceeds of each...
Berkman Investment Bank has the following bond deals under
way:. Determine the net proceeds of each bond and the cost of the
bonds for each company in terms of yield. The bond yield in the
table is the market yield before the bank charges its commission.
Assume all bonds are semiannual and issued at a par value of
$1,000.
Company
Bond Yield
Commission
Coupon Rate
Maturity
Rawlings
7.1%
1.9%of sale price
0.0%
20 years
Wilson
7.5 %
3.1 % of...
Which money market is not created by a bank? Commercial paper Certificate of deposit Bankers acceptance...
Which money market is not created by a bank?
Commercial paper
Certificate of deposit
Bankers acceptance
Federal funds
Commercial paper is often backed by a bank line of credit, which gives the borrower access...
Commercial paper is often backed by a bank line of credit, which
gives the borrower access to cash that can be used (if needed) to
pay off the commercial paper at maturity. Please explain how the
bank line of credit can reduce firm’s liquidity risk caused by
commercial paper.
what is the difference between bank loans and commercial paper? are there specific situations when companies...
what is the difference between bank loans and
commercial paper? are there specific situations when companies
should resort to using commercial paper?
2. Identify the three main types of commercial banks. Explain how a typical commercial bank is...
2. Identify the three main types of commercial banks. Explain
how a typical commercial bank is capitalized.
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